Standard Chartered Bank Korea, which has been criticized for excessive dividend payouts, is under fire for deciding to pay 500 billion won (US$440 million) in interim dividends this year and paying excessive service fees to its parent company in London.
Early this year, the bank decided to pay an interim dividend of 500 billion won this year. The amount is excessively large, given that its net profit has been less than 300 billion won (US$264 million) a year in recent years.
Last year, the bank earned 224.4 billion won (US$197 million) in net profit and decided to pay 112 billion won, half of the net profit, in final dividends. In 2015, the bank came under fire for paying 500 billion won in dividends, although it posted a negative net profit. In 2016, it earned 223.6 billion won in net profit and paid out 80 billion won in dividends. In 2017, its dividend payouts amounted to 125 billion won, about 45 percent of its net profit of 277 billion won.
Compared with the dividend payout trend in recent years, the bank’s decision to pay 500 billion won in interim dividend this year is excessive.
The bank is also criticized for paying excessive service fees to its parent company. Last year, it paid 166 billion won (US$146 million) in service fees, up as much as 38 percent from 119.90 billion won (US$105.45 million) a year earlier, according to the Financial Supervisory Service on March 31.
The service fees include consultancy fees and brand royalties paid by Standard Chartered Bank Korea to SC Group. Of the total, consultancy fees amounted to 125 billion won (US$110 million), up 10.7 percent from 112.9 billion won in 2017. The bank said consultancy fees are determined in consultation with the National Tax Service based on the Advance Pricing Arrangement (APA) regime stipulated in the Korean tax laws.
Financial industry sources suspect that Standard Chartered Bank Korea increased its service fees in order to increase its payment to its parent company without causing a controversy over the outflow of national wealth.
During a recent National Policy Committee of the National Assembly, Democratic Party lawmaker Kim Byung-wook pointed out that Citibank Korea and Standard Chartered Bank Korea paid out an excessive amount of dividends. Regarding this, Yoon Seok-hun, governor of the Financial Supervisory Service (FSS), said, “Citibank Korea and Standard Chartered Bank Korea paid out a bit much (of dividends). They somewhat created market jitters and teetering.”
The FSS has recently undertaken a management evaluation of Citibank Korea, which allocated a total of 934.10 billion won (US$821.55 million) for dividend payouts last year, more than three times larger than its net profit of 307.4 billion won.